LTL news: YRCW, Teamsters reach tentative agreement on new concessions
September 30, 2010
Following news earlier this week that less-than-truckload transportation services provider YRC Worldwide (YRCW) won another round of concessions from the Teamsters Union, the company announced on September 29 that its board of directors has approved a tentative agreement with the Teamsters.
YRCW officials said that the Teamsters approved submitting the tentative agreement, which is designed to improve YRCW’s competitive position in the LTL sector, to the company’s Teamster employees for ratification.
Last year, YRCW won concessions from its 40,000 or so Teamsters on a 15 percent wage give-back and an 18-month freeze on pension contributions which was set to expire in January. As part of the tentative agreement, YRCW member companies would re-enter the multi-employer pension plans that they contribute to, which would cost YRCW an estimated $30 million a month—or $360 million annually—in additional costs.
Those concessions have cost the typical YRC truck driver an estimated $12.10 an hour, or just over $25,000 a year, in both wage and benefit cuts, according to internal union documents. Drivers at YRC make approximately $56,000 a year, before any overtime and fringe benefits. YRC already has lost in excess of $2.1 billion in the last three years, the most losses ever racked up by a trucking company.
In an 8-K Filing with the Securities and Exchange Commission, YRCW said the tentative labor agreement would amend to and extend the company’s National Master Freight Agreement (NMFA) to March 31, 2015 upon ratification by its Teamster employees.
And the average annual savings of $350 million YRCW expects to receive through the expanded NMFA—assuming projected levels of business, employment and costs during that period—included savings from pension contributions at a reduced 25 percent contribution rate compared to the full obligation rate that would resume in 2011 without the tentative agreement, according to the 8-K.
YRCW added that the tentative agreement does not implement new wage reductions, but the 15 percent wage reduction that was previously ratified in August 2009 would continue through the extended term of the NMFA.
Apparently as part of the concession agreement, YRC Chairman and CEO Bill Zollars has agreed to step down after 11 years at the helm, effective upon completion of the plan. The company said it would seek a replacement from both within and outside YRC.
“The worst economic recession since the Great Depression continues to batter the trucking industry and threatens our YRCW members’ jobs,” said Tyson Johnson, Teamsters Freight Division Director and co-chairman of the Teamsters National Freight Industry Negotiating Committee (TNFINC). “While we recognize that this plan contains economic and workrule concessions that are difficult to accept, members need to fully understand that if this NMFA modification is rejected there is no doubt this company will go out of business. This plan is far from perfect but it will allow more than 25,000 Teamster families to continue to earn a paycheck, maintain healthcare coverage and preserve their pension benefits. The alternative is a YRCW bankruptcy that would be devastating to our members.”
As part of the tentative agreement, YRCW is required by the Teamsters to raise $300 million in new equity by December 31, 2010 and close the deal by March 31, 2011. Under these terms, YRCW is required to obtain a definitive agreement with an equity player, and failing that equity requirement, require that lenders convert a portion of their debt to equity in order to keep Teamster concessions in place.
“The vote may be difficult in an environment where some companies are giving back previously cut wages and others, such as Old Dominion, have implemented wage increases,” wrote Dahlman Rose analyst Jason Seidl in a research note. “We also remind investors that earlier in the year Arkansas Best Teamsters voted down concessions proposed by that carrier to address its financial challenges. Furthermore, while the economy remains uncertain, it is less dire than 2009, when YRCW seemed to get as much rope as it demanded from stakeholders. We believe the pending agreement may create a cloud over YRCW.”
Ballots for the concession plan will be mailed out to YRCW Teamsters on or about Thursday, October 7, with ballots scheduled to be counted on or about October 28 and 29.
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